Investors had high expectations heading into NVIDIA's (NVDA 1.81%) fiscal first-quarter earnings report in late May, and the graphics chip maker didn't disappoint. 

Revenue and adjusted earnings per share crushed expectations, with record results across the gaming, data center, and professional visualization segments. What's more, management guided for revenue of approximately $6.3 billion for the fiscal second quarter, higher than the $5.5 billion analysts had expected. 

In a statement, CEO Jensen Huang said: "Across industries, the adoption of NVIDIA computing platforms is accelerating." These 10 words from the graphics wizard himself spell further upside in 2021 for this growth tech stock. Let's look at what management had to say during the fiscal first-quarter earnings call, and why the stock might be undervalued in the near term.

Data center processor

NVIDIA's A100 GPU for high-performance computing. Image source: NVIDIA.

Expect more growth from the data center segment 

Data center revenue reached a new record of $2 billion in the quarter, increasing 79% year over year. Huang mentioned on the earnings call that the company is seeing strengthening demand for cloud services from groups ranging from science researchers to those needing computing power for remote work. 

NVIDIA's technology is everywhere. In February, Alphabet revealed that Google Cloud is using NVIDIA's A100 chips to power the artificial intelligence (AI) workloads behind Square's Cash app. "Every industry is becoming a technology industry and accelerating investments in AI infrastructure both through the cloud and on-premise," NVIDIA CFO Colette Kress said during the earnings call. 

NVIDIA expects further growth from Q1 to Q2 in the data center segment. But NVIDIA could experience even stronger demand in the second half of the year based on its strong product lineup. "We do see, as things continue to open up, a time to accelerate in the second half of the year for data center," Kress said. 

If demand keeps up, NVIDIA would also be in a position to see further improvement in adjusted gross margin and profits. Sales of higher-margin chips in the data center business boosted non-GAAP gross margin by 40 basis points in the quarter, which contributed to robust growth in adjusted earnings per share of 103% over the year-ago quarter. 

Investors are expecting a slowdown in gaming

The one near-term risk to NVIDIA's guidance is what happens with cryptocurrency demand. A potential drop in cryptocurrency prices could affect demand for its GeForce gaming chips, which are often used to mine cryptocurrencies.

It's concerning that crypto mining is boosting the gaming segment; gaming revenue jumped 106% year over year to $2.76 billion during what is typically a slow quarter for the gaming industry. Management reported $155 million in revenue for its cryptocurrency mining processors (CMPs), but the company isn't certain how much of the overall gaming growth came from miners who might be buying dedicated gaming GPUs. The uncertainty around crypto demand, and whether a repeat of 2018 could bring down gaming revenue, somewhat clouds the investment case for the stock right now. 

Still, NVIDIA's stock price trades at a forward price-to-earnings ratio of 45.7, which isn't much relative to how fast the business has grown to this point. The forward price-to-earnings-growth (PEG) ratio is currently 0.47. Typically, a PEG ratio of less than one signals a bargain, so investors may already be discounting the potential for a slowdown in growth.

The consensus analyst estimate has NVIDIA posting revenue growth of 34.5% this year, with adjusted earnings per share climbing 36% to $13.61. However, these targets might be conservative, given NVIDIA's recent results that crushed expectations and the forward guidance that was also well above analysts' estimates. 

All said, there is tremendous business momentum at NVIDIA that analysts seem to be underestimating, which could push the share price to new highs in 2021.

Looking ahead to next year, NVIDIA says the acquisition of Arm Holdings from Softbank Group is still on pace to close in early 2022. If the $40 billion deal gets approved by regulators, that could be another mid-term catalyst for further share price gains.